Anthropic’s AI Slowdown, OpenAI’s $1.2T Valuation & Salesforce’s AI Bet

0:00 Daniel, you spent an inordinate amount of time at at Dreamforce 24 >> 36 hours. 36 hours. >> Well, for Daniel Newman, that's that's a lot. >> I guess for me, that's a long time. >> Yeah. I mean, you and I have you know, jetted in and and we're out. >> Yeah, we are we are we are notorious for our short stay. >> Founder and CEO of More Insights and Strategy, Patrick Morehead.

0:30 CEO of the future group, >> Daniel Newman. >> Do we know what we're talking about, Morhead? >> We absolutely know what we're talking about. >> Welcome back to the 65 pod, everybody. We made it to episode 320. 320 episodes. I I cannot believe it. Daniel, I look at that number and it's just just just mindboggling. How you doing this morning? Yeah, we were young men when we started and now we're not.

1:00 >> I don't know. Cry, you know, physiologically I think I might be even younger. So, I mean, I was I was a fat pig. You know, you can see the >> I I think the the leadin videos were after I'd lost 55 pounds. >> Yeah, they edited you down. >> Yeah, >> they edited you down. But don't worry, you know, they take clearly the producers have a, you know, more love for you than me. I I because I'm pretty sure they actually edited me up. They actually made me even fatter in some of those videos than I even was, which is hard to >> It's kind of like Chimath's sweater, right?

1:37 >> Sweater. It's how big Beni off was next to S. >> You gota love Jensen's million years of evolution between me and you. Like they we realize that we don't need them that big anymore. We don't need to be that big anymore. Oh, that stuff just makes me laugh, you know. >> I like to be 6'5, though. I I gotta be honest. I think it I think the world would look good up there. I can't tell because I've never been, but >> yeah, >> when I stand on a box, it's kind of cool, >> you know? I always used to think I was six feet and then I was like, well, okay, I was 5'11 and three quarters and like and then I'm I'm like 5'11. Like, yeah, barely, you know? It's crazy.

2:18 >> You're shrinking. By the way, you could probably get like half an inch back. I've been dead hanging every day. >> Yes. >> Twice a day for like I try. I know you can do two. I I got like a hundred seconds before my arms feel numb and they like feel like they're going to fall off. But I'm a heavy boy, you know, 220 lbs. But like I do notice like my spine and my like shoulder like rotation has gotten better.

2:42 >> so anyways, but did you know you're taller when you lay down than when you stand up? >> I had no idea. >> Yeah, this is actually true. So if you measure yourself laying down, that's your true height. >> Not joking. But when you stand up, so even when you wake up in the morning, you'll be a little bit taller than you are throughout the day because as the day goes on, you you get some compression and you'll usually lose like half an inch.

3:05 >> Yeah. Yep. Yep. >> Useless information for everybody out there, but I'm sure you all wanted to a little lesson to know that when you're measuring yourself, lay down, then you can lie to everybody about how tall you are when you stand up. >> I know. No, it's great. I mean, if you don't like what the current state of measurements are, then you just change the measurement. You change the measure of merit. >> As a founders of a benchmarking company, I'd like the world to believe that our our our measures of merit are legit, but yeah, I mean, you can definitely play with all the inputs to change the output. Let's just put it that way. So, >> benchmarking at its finest. So, hey, we got a great show today. you know, we we film on a on a Friday and therefore, you know, this first topic made its way over the weekend. But let me tell you what, it was the discussion point over the weekend. That's pacing the frontier SSA that Daario brought out. I mean, everybody came out of the woodwork. Sam, Musk, Sabis, Zuckerberg, Jensen, Sachs, and even freaking China came out on that. And, you know, it's funny. who would have thought that it would have culminated in in in the event that you attended which was Salesforce's Dreamforce. but it did because Sam and Daario were there and so was Jensen. So it just kept this this whole thing moving on. So yeah, we're going to talk about that. We're going to talk about Open AI.

4:33 you know, looking at a $1.2 trillion pre preIPO round. We had AI in for summit just when you think there wasn't enough events that you can attend. we had analysts from Moore and Futurum on the ground there doing videos with the with the 65 and maybe or maybe not signal 65 benchmarks were shown on the Nvidia stage. we're also going to talk a little bit about it's funny what started off as a AI chip route turned into absolutely a a crushing bull week. You know, I looked at the semi semi semi picks from Wednesday to hopefully today and they were absolutely off the off the chain. So >> did you buy the top, >> Daniel? You know, for once I didn't. In fact, I took the market went down and I went against the Pat Morehead stock selection strategy and I actually bought bought the bought in the trough.

5:36 >> You bought the dip? >> I bought the dip, but I haven't sold at the peak. So, >> you buy the dip. Dippity dip dip. All right. >> Yeah. >> Dude, sell some. Like, >> yes. just, you know, just just >> sell some because like you need to make a dollar and maybe you'll love how that feels. >> The buy high sell low thing is exhausting and I just want I want you to sell the top on one of these.

6:01 >> Yeah. It's funny. I think of every time I sell, you know, something that I get 60 cents on the dollar. So, >> well, you get the tax break on the loss. >> Yeah. Hey, let's dive into the show. Let's start off with the decode. All right, Daario kicked it off with his pace the frontier essay which essentially said slow down. we need to be regulated. we need to have antitrust waiverss so we can all work together and just slow down. And oh by the way, keep an eye on those open models and all the infrastructure that's being able to China. Everybody came out.

6:45 Sam, Elon, Hassabis, Zuck, Jensen, Xi, right? it was it was it was it was pretty awesome. Help us break this down, Daniel. >> Well, it ended up becoming like, you know, the battle of the the accelerationists versus the the doomers. And it was very interesting. I mean, look, last week our show was all about that kid Jacob Coxin that came out, became like a news sensation. 160 million people viewed his tweet, which is great. You and I have probably in our 20 years on Twitter haven't gotten that many views. I mean, joking, but not by much. And the bottom line is is then it built up to, you know, you and I thinking that was like this big narrative. Then we woke up on the weekend to this to this pacing thing, which I don't know about you, but it became like my entire weekend and into Monday. And then we had to, you know, like I I was at Dreamforce and so Zuck was there. Not Zuck. Jensen was there, Sam was there, Daario was there.

7:45 I don't know if they were allowed to have Sam Daario and Jensen in the room at the same time because I wasn't sure if they were going to box because Jensen basically said, "You're full of shit." I mean, in so many so many words. And by the way, you allin summit was going on during this. So you had comments coming in from from Elon and Jensen was there. China called it fear-mongering. what's really interesting in in in breaking this down and being a little less hyperbolic about this and just being more intellectually honest, the the bottom line is is that you and I have been through some technology re revolutions, industrial shifts. We've been, you know, you've been through more than me because you're old, but like, you know, you've been through internet, we've been through social media, we've been through mobile, we've been through you know, blockchains, AI now and all these different things that have come in and come out and we've been through the hyperbole, the headlines.

8:37 You know, you remember the there was there was all the ads against Edison and electricity. Remember the ads, people electrocuting themselves? I mean there's always this kind of dumerism that comes with all new technology about end of jobs, end of of of certain industries. And this is why I think those that have studied history kind of tend to come back and be like each revolution has brought more not less because that's what history has suggested. Now again, every revolution is different. But here's the bottom thing with each new technology that comes out the optionality to use it for good or use it for bad exists, right? I mean basically you can when the internet came out or when when YouTube came out like you know the things that they're saying like the you know they talk about Middle Eastern countries using clawude to try to build weapons right and fact is is like people have been doing that as long as the internet's been out. There's the dark web. I mean there's been videos published on on you know on YouTube that can teach you how to do things that you wouldn't want most people to know how to do. And what's happened with AI is it's all faster. It's more accessible. It's faster. It gives you it makes easier connections. It gets you to the right answers sooner. So certainly we can use AI whether it's for hacking, whether it's for weapons, whether it's for biological risks, whether it's for grid penetration of of of a grid. It's it's certainly there. At the same time, the same technologies we're building can also be used for good. It can be used to develop drugs, cure cancer, potentially improve economic well-being and and impoverishment. Like these are all things that are possible with the same technology. And so you can't halt the evolution of good for bad. Now in fairness, nobody's coming out and saying stop. But the the bottom line is what they are saying is slow down. And then there's all these questions, Pat, about like the the how genuine is this?

10:23 >> Are they genuinely wanting to stop because they're worried about these agents creating a bot swarm that's going to plant replications of itself so that it can make sure that you can never turn it off under any circumstances? And I'm pretty sure unless we have physical robots overseeing our data center, there has to be an ability to pull the plug on this stuff. But >> but having said that, like these are the worst possible scenarios, you talked about it last week, they get the football, they're able to launch nuclear weapons, they're able to go through all the different physical security because it's not just digital security. These things have digital and physical and and all the things. But anyways, I could ramble about this for a long time. The the bottom line here is is that like one is there is no real option to slow down.

11:04 I just do not believe this. I believe the slowdown request is regulatory capture. The idea is is that every major technological wave, whether it's been operating systems, whether it's been social media, has been won by a couple of companies and in a combination of best product and regulation and barriers to entry has made it where you know like there's only a couple of of of social businesses, there's only a couple of search businesses, there's only a couple of OS companies that anthropic and open AI want to be a couple here. They do not want to have open- source models, disruptive capabilities. And I think a lot of this comes back something I've said for a long time, Pat, is there is no moat in the model. The model is less and less of a moat. And the real moat is infrastructure. And you're seeing the race to being able to have enough compute to be able to keep up demand for the models. And so this is just this cycle. But now what we have is trillion dollar valuations that are having to be justified that are going to try to go public that all of a sudden someone realizes like crap I can do 99% on GLM53 or 98% on Muse or 97% on Grock that I can do on Frontier Model and then the questions around the business's long-term value and sustainability start to come up. Regulatory capture can fix this. I think that's what these guys are aiming for. But at the same time, I'll just summate this with we do need to pay attention to safety. We do need to pay attention to security. It is the responsibility of the industry to make sure they ship safe products, secure products. Jensen was right about that.

12:32 I agree more with Jensen and more with Zuck than I do with Daario and Sam, but again, this is probably a two-hour long conversation. I said a lot and I probably not even gotten close to to really putting my opinion out there. >> That was a great breakdown, Daniel. And you know at at times like this where you have these multivariate issues that that are very difficult I I I try to simplify or I glom on and admire what somebody someone else has done to simplify and and Jensen really hit it hit hit it first. and I think you know it was the short form of what David Saxs had brought out which was essentially it's about product safety.

13:13 If you do not think that your product is safe, then don't bring it out and do the testing on it as as much as you can. And oh, by the way, we know that it's the testing procedure that had has had, you know, the circus animals leaving leaving the tent and keep your freaking animals in your tent. Keep the lions and the tigers and the monkeys in the cages. and and just do that. And it just that that really hits, you know, my Midwestern sensibility. It just it just it just makes sense, Daniel. And people will say, "Oh, but this is different. This is so much more complex." No, this is product safety.

13:55 this is what it is. It's self-driving cars product safety. it is drug safety. and by the way, when I say drug and and highway, I don't want NHTSA or an FDA type of of thing that will slow everything down to an absolute crawl. And then Jensen simplified it even more, right? And and Jensen is just so so good at this. I have so much respect for his ability to simplify the problem. Essentially, he said it's all about omelets. If if you can't bring out a good omelette and this is, you know, going back to his Denny's where Nvidia was created, then don't don't serve it. Okay?

14:43 Like if it's not a good omelette, don't serve it. I I am in >> super common sense, >> right? So it just makes sense. So Daniel, great take. there's nothing else that I have to add on. We could sp we could spend a whole show kind of thinking through what we should and can do here and what's important and what the intent underneath all this stuff is for everyone out there. We don't usually do like PSAs on this show, but like just my recommendation is is read everything with a bit of skepticism right now. The the the media narrative requires critical thinking. Be a little bit curious and realize that it's it's really popular. the hyperbole is popular. People love these AI will blah blah blah. AI will end humanity. AI will displace all jobs. AI will replace all software. AI will end all security. AI like if you think about the number of times we've heard this, this is this is just another deepseeek moment.

15:41 >> Yeah. Yeah. Exactly. So the same week let's let's move to the next topic which was open AAI anthropic and Google deep mind confirmed that they are working together trilateral trilateral coordination on on AI safety almost in response even though openai global chief policy director said that they've been in active talks for several weeks. I I view this as a as as a rebound. They got the message and said, "Listen, you know, if regulatory capture doesn't work, then there's got to be a plan B and hey, we could all work together." So, I I think that this makes I think that that this quite frankly makes a whole lot of sense than than a a waiver. And I do find it it ironic that the three companies decide to get together. They first said they they needed some air cover on regulatory. And by the way, you know, for those who don't fully understand it, you can't have three big companies working together on something that might look like a a a a monopoly or a triop or ol. It's not even an oligopoly, but it's three parties working together to squeeze out the the small people, namely the smaller labs and and the open-source companies. There's not a whole lot of meat together, right? We haven't seen a coordinated paper yet. So, I'm I'm kind of keeping my keeping my options open. There's not a whole lot to debate and and and pull around it. But I do find it very ironic that the three labs are confirming that they're coordinating on safety and in the same week they disagree on whether they need an antitrust waiver to do it.

17:34 >> Yeah. I mean, look, the the idea of the three three coming together and trying to solve all this is probably the definition of sort of a antirust coalition. I mean, the three companies that have the advanced frontier, and I know some people argue that Google is behind, but I actually think it's funny because Google and Meta kind of more aligned on this topic of like they're behind because as public companies, they've got certain beliefs in what safety and and and and governance looks like and they're not releasing things that they don't know if are safe. Whereas these private frontier lab VC companies are kind of full steam ahead. but I do think those are the, you know, that those three companies could certainly drive alignment. but it's also interesting to me that Zuck's staying outside of this all. Look, I think this is a more to come. I think to your point, there's not a lot of meat here. I think the industry, what I will agree is like the industry needs to be self-regulating. That's how capitalism goes fast. I mean I do agree that like with the FAA and the NTSB with the autonomy of vehicles like we need you know when there's physical harm and safety and I think in this case when there's potential digital risk I mean you know the hacking risk the the risk to our grids and infrastructure it's real and you know what I put out there is this is like I think the regulatory needs to come along for the ride. I don't think regulatory doesn't get involved but I think if we are trying to lead by regulatory and regulation we become Europe and you know when when when you know laughingly when Europe says you know >> we need to slow down or anything it's like did you ever start I mean over there like you know like like Europe's >> the exact reason why we have to be really thoughtful about how going too hard on regulation could be damaging because Europe's economy is basically stalled for half a century now because it refuses to actually allow its technology to to to innovate at pace.

19:36 It's a capture it's a capture economy. It's it funds itself by you know antitrust and anti-competitive suits against mostly American companies. And it's the it's the wrong approach. We need balance here. And that's why I said like I went on TV Pat and I said common freaking sense. Like use common sense. I don't know why we have so little of it. >> Yeah. Totally. Those are those are good ads here. You know, one of the things we we didn't discuss, I think, enough on this is the impact to open source.

20:08 you know, I think we're gonna hit I think we're going to hit some of that when we hit the the flip. But if you look at at at what could have happened if we went along with what Daario and and it's what Daario wants. And it's so funny. We say, "Oh, you know, Sam agreed." Well, Sam said he agreed. and they comes out with a completely different proposal or a modified version of it. So anyways, this is this is what makes tech analysts and influencers worth something I guess to >> but pay you know and just like it's worth taking a moment here but like open source like like probably the one thing we missed on this whole multi- multi- topic here in the decode is the frontier is the pace like let's be honest right I mean I think that was one of the smartest things that was said that we didn't comment on like the frontier actually does dictate their own pace. If they want to slow down, slow down. Like there's only a couple of them. I mean, Google did slow down. Meta did slow down. Like, they actually slowed down. Anthropic and OpenAI have not slowed down. And the the net of it is is that everyone can talk about how great open source and openweight models are, but you and I both know that the open source and openweight models would not be as good as they are if the frontier wasn't moving as fast as it is.

21:28 like they are doing some interesting things architecturally and they do interesting things for you know for token generation optimization for for improvement all the way back to test time compute and how they did that with deepseek one but even deepseeek even these GLM models these Quen models they think they're anthropic and there's a reason that stuff happens is because they are using those foundational models to build their own models and so if the frontier slows down open source will too the real debate is is you know Dario said 5 to 10% of of the capabilities are being used. So for the average activity that an enterprise needs to do one of you know the five skills that we measure on our pinnacle benchmark for an executive skill an analytical skill a customer skill you don't need Astra six you know you don't need Astra to do it you can probably use soul you could probably use a model even older than that to do it and that's the point of where people are where the economics are because at this point like 90% of the economics still flow to two companies sorry I I just want to back in and talk about that because I think that's that's a real thing people need to be aware of. The open doesn't move if the frontier doesn't move.

22:36 >> Yeah, I agree. And check out our Signal 65 Pinnacle results that that puts that up there. One thing Pinnacle doesn't test yet are client-based devices. Pico and I, we have four Sparks at this point that's sitting on his sitting on his kitchen table and we've got DeepSeek V4 V4.1 Flash, which is very similar in in output quality to 5.6. six soul, right? Like, think about that. It is crazy. And everybody says, "Oh, you know, I there's like a three-month difference." I agree with the distillation point. I did a victory lap on that last week. But I also want to add that that these Chinese model makers and even the the IFM out of the UAE are bringing some very novel architectural capabilities like an 85% reduction in KV cache. I mean that is that is unbelievable what that means. It's just freaking cheaper, right? So anyways, check check out the Signal 65 Pinnacle stuff. Do your own comparison there. Hey, let's get into the next topic. Daniel, you spent an inordinate amount of time at at Dreamforce 24 >> 36 hours. 36 hours.

23:56 >> Well, for Daniel Newman, that's that's a lot. >> I guess for me, that's a long time. >> Yeah. I mean, you and I have you know, jetted in and and and we're out. >> Yeah, we are we are we are notorious for our short stays. But look, I mean during given everything that was going on, we were at the center of we we were at the >> amazing >> technological center of the universe. I mean like I said literally within an hour of time I heard Mark Ben off talk to to Sam to Dario and to Jensen.

24:23 and amidst all this, I mean, there's a lot going on and probably, you know, well, a lot of that wasn't directly related to Dreamforce. What it does kind of circle back to is when you think about security, think about safety, you think about governance was that whole AI eating software narrative, you know, which was that you know AI SAS apocalypse, the end of enterprise software and you know a Salesforce rolled out AI force built on top of Cloud Force.

24:53 >> Yeah. >> Then you have these these three showing up. There's a reason for this and the reason here is that the narrative, the hyperbole of AI ending enterprise software maybe met the moment for a lot of people who have a beef with enterprise software systems of record don't like you know their applications maybe have some data entry misery in their past but it's just not playing out in reality and so what the smart software money are doing now and this is what Salesforce is doing with its AI I force is it's understanding that the future is different. The future, you know, Mark was on R 65 summit, talked about the future is headless. I know we have some debates on whether headless is the word we like, but the the net of it is is that, you know, a model plus a system of record with your critical deterministic business data plus your infrastructure is going to be the way that we interact with the business's workflows. And so, you know, I I I believe and I went to the investor today like the growth rate is intact. The business is is seeing strength. They're building agent personas across AI force.

26:08 They're partnering deeply with Claude, planning to partner with OpenAI, building a an infrastructure that can work across different models and harnesses to basically do enterprise workflows on AI force. And what I think we're seeing is is is the fact that people aren't going to move off their systems of record, not their critical ones. And so, that's why this group showed up. That's what, you know, is basically happening here. This is why their agent and data cloud businesses are growing at triple digit percentages. it's a new company.

26:40 It's it's got a new cadence of growth. You heard Mark talk about this. He hasn't had a launch like this ever. you know, but at the same time like agents and and AI force are are are certainly traversing a narrative that had long made it look like these companies may be in trouble. Market hasn't fully caught up yet, but seeing what they're building and making available looked really encouraging. And like I said, the the people that showed up to me are indicators that that the the AI pivot was was was a great headline, but it isn't reality.

27:18 >> Yeah. From the start, and I think this came out in our discussion on on all the SAS apocalypse that that brought brought these tickers down like 40% 30 40%. some some even more was that if you are quickly integrating valuable features that leverage AI you're going to be you're going to be okay if you're an enterprise play and it's based upon the premise two two premises first of all it it's more than just doing a P right I can go on perplexity or you know name name end to end service lovable or something like that and I can build a PC now can it hit every piece of data protect that can it give a known good output across you know 500 different situations and can it be updated and secured in infinitum down the road that's that's a very different proposition so the SAS providers like sales Salesforce didn't have to be the first with these capabilities but they had to very quickly put the integration in so their customers could derive value. I think the rub is always in the end you know dream force sorry salesforce has to grow it has to grow profit dollars and then you ask yourself well where is that money going to come from right where what budget is this did the marketing budget go up did the sales budget go up or is it more about the effectiveness can I drive more sales can I increase my marketing spend of effectiveness and and and and efficiency and I think Salesforce by the way in addition to service now should kind of be put up on a pedestal as as this is this is how it is done.

29:25 some of the notables that I noticed you know we've talked a lot about open models we've talked a lot about Frontier models but what we haven't talked a lot about on this show lately are custom models and Salesforce took Neotron and they created their own custom model called called KA and and I think that was the the big >> the big the big deal and what they did is so first of all Neotron is not distilled from any other model and and two it scores some of the highest openness ratings on artificial analysis. So open it you know and by the way I I did a diet tribe on what open actually means on a Forbes article if you want to check that out.

30:19 open is a generic but but there's open weights there's open data there is open architecture there's five different classifications of open and hats off to artificial analysis but neatron neatron ultra scores I think think the max score on that in addition to the IFM models and they took that and they modified it and they they trained against 30 years of of data from from from CRM deployments.

30:54 They called it synthetic data sets to not freak out their customers. But but this just this just this just makes sense. By the way, that's the same model that you know, Alex Karp talked about that that he rolled out inside of his inside of his service offering. So that that was a big takeaway for me. But if I if I dial back, this is all about multimodality and utility. It's it's hey, if you want an AI type of interface to get to the same result, if I'm Salesforce, I got that. If you want classic Salesforce UI, but but adding the power of AI, we can we can offer that as well. And some people are like, "Oh my gosh, like you're giving away the farm by doing this with people like Anthropic." I I think that's missing the reality of where the value is. You know, Daniel, you and I have debated or discussed where does the true value of AI come from, right?

31:56 Technology is going to be homogeneous. So to me, it's it's timing and it's people and it's data, right? Like how quickly can you get there and hoover in the customers? That that's the timing. what unique data do you have and what people do you have to be the the the human in the loop and and from a Salesforce perspective that's that's their sales force right you remember when they laid off a bunch of their their salespeople you know because their AI was so good and they're like you know what this actually isn't working and then they went out and they hired thousands of human sales sales people out there. So, what a big show. I'm sorry to have missed it, but I was unfortunately tied up at a >> I covered it for you. Don't worry.

32:49 >> No, I appreciate that. I was at a client advisory that had been baked in quite frankly before I got invited to Dreamforce. >> Client advisory, he says. Prove it. >> I don't know. I was in Seattle. I could tell you tell you which restaurant I ate at and the Hyatt Regency I stayed at. I can't tell you the the customers that that were there but anyway. >> All right. All right. I believe you. >> All right. Let's go into the next piece here. So, Open Router says Open AAI is pulling even with Anthropic on its its its developers. So I want to put a caveat out there and that is that open router you know monitors maybe you know 10 or 20% of of the entire AI traffic out there. The other modalities are going through a CSP going directly to the the the frontier lab. But and this came out from a a Gavin Baker a trades management tweet out there that you know quite frankly and and you know during the anthropic claude 4.6 six moment you had open AI basically not flatlining but but losing a lot of market share to anthropic and what this new September 16th data showed that OpenAI captured 50% of the API traffic share versus anthropic up from 20% in in June which is just absolutely absolutely fascinating So, and I think it just shows that that this pingpong effect of who's in the lead and and who are the lagards and just when you think that somebody has checkmate, something else comes along along the frontier and says, " hold on a second. that's too fast." So, you know, you've got Google, you have Anthropic, and you have Open AI, and then you you've got you've got open source, and then you've got custom like we saw with with COA. I think this is good for the market to have all these different options and this back and forth. one thing for sure this puts an exclamation point on is is that Sam's upfront investment and locking in the infrastructure is part of of why this happened. What God, I just I just love the the the the free resets from TBO, right? Tibo. I don't know his exact title at at OpenAI, but this guy is is is like, you know, AI Jesus for for free token resets and he takes feedback and he's out there posting and responding to to the critics and asking people kind of kind of what they want. So, congrats congrats to OpenAI on this. Look, this is, you know, where I'm just going to double triple click is the race ain't over, folks. It's just not, you know, these are new caveats. It's it's by the way, it's not even just limited to the two. You know, it's we thought OpenAI had won and then we thought that Open AI had had lost and that Claude had built a, you know, an an un achievable gap for any other company and then >> Soul looked better. Astra blew it out of the water on our benchmarks. and then you know we saw what Muse did came back with something that was not quite but close very out of nowhere right they were like nowhere. Everyone had said Meta was done. and a lot of people have ruled Google out and said Google can't come back and I think that's a fool's errand. you mentioned some of what Nvidia is doing with Neotron and you know to think a company with that type of capital resources can't build something. So that that's the first kind of thing I'm just thinking about as I watch this this happen. because clearly there's less of a moat itself in the model meaning that if someone finds another model that can do it and of course the economics of the model becomes more efficient where it could be deployed the size of the model the amount of compute required and you and I have talked a lot about this but like you know the aggressiveness on buying compute has a meaning. people like kind of thought it was crazy, but look at how much compute Zuck's been buying. Look at how much compute Sam went and bought when people thought it was crazy. There's no way you can get a return on that. And I believe Jensen this week came out and talked about how you know 50 billion in in in investment will return about 50 in a year on Vera.

37:51 Reuben on on a gigawatt of of of compute. And that means in year two and three it starts to return pretty handsomely. Well, these folks are buying many. I think Enthropic's note today came at their buying they're trying to have five up by the end of the year. and so if you look at that revenue ramp, it's there's a lot going on. But here's the thing, like I said, it's fun because the race ain't over. It's fun because there's more companies to enter the competition. It's fun because like all the things you mentioned about open source creating a a a backend pressure for the frontiers to keep building. but again we are still seeing that that this is a race that's going to be won on having enough resources and the resources here are energy compute all the constraints.

38:41 And by the way, that's why the markets keep ripping each time that we keep thinking it's going to pull back >> because, you know, look at Michael Dell, by the way. Congratul I just want to make a quick shout, but I think he's now the second >> wealthiest human being in the world, you know, and someone who, you know, by the way, just one of the absolute best humans that that I' that I've met. I know you know him very well. So, but like I'm just so happy for him, man. I mean, God, what a what an incredible run. I mean, it's not like he was hurting before. Isn't it amazing that, you know, the number one is Elon and he has like more haters than than than ever? And Michael pretty much everybody universally respects and and likes Michael. So, it just shows that, you know, you can you can be mega rich and and not be not be a dag and and offensive and show value to everybody. And now, you know, him unlocking value with the children of tomorrow is just so so it's so great.

39:40 It really is. >> I mean, one thing to one thing to add on, you know, something that we didn't even talk about that just came out of nowhere. Talk about competition. When's the last time we talked about Google, right? >> I know. >> And by the way, Google is number two on the Pinnacle benchmark. Gemini 3.8 Flash thinking high gets better. Oh, and Grock 6 thinking gets higher scores than the best Claude Fable 5.1 >> on what? On which were the scores?

40:12 >> On the overall and and on knowledge worker, it's number two on data analyst. It's number two on IT professional. >> I had to refresh. Sorry, I had I refreshed. Yeah. Yeah, you're right. the Astrothinking Max has won and now you got Gemini Grock, which I didn't even mention in the competition. and so in the top 10, it's it's basically GPT, then Google, then Grock, then Muse. >> I mean Claude's in there, too. Sorry. Claude, then Muse, then Quen, which as we know, and then I think Deep See rounds out the 10. So, it's the race is on, man.

40:50 >> The race is great. Daniel, you had ended your segment talking about infrastructure. there was a huge summit last week, AI infrastructure summit where a lot of things were announced I wouldn't say new product announced but but more new information came out doubling down on positions and hey maybe even signal 65 results were we we we got some mainstage action right when Ian Buck presented from Nvidia and we put out some new benchmarks around CPU Again, remember that was a hot topic for a while. You know, it still is important, by the way. We're just not talking about it as much. And this is a, you know, a bit of a controversial one. I think people are going to going to have some debates. And obviously, Nvidia is hedging, they're partnering deeply with Intel on future head nodes, CPU head nodes, but they're also, you know, believe that Vera is a 20 plus billion dollar annual business. But it came out with a, you know, you know, I'm going to because I wasn't at the event, but the high level data point that came out was we ran 1.64x 64x faster per core than the leading x86 processor. Now, that's the leading what's out now. Of course, some companies might debate what's about to come out, but we can't test what we can't test. so that was kind of the big thing for us there. I mean, that's a, you know, that's basically ARM versus x86, just a note. And right now the the ARM core which you know obviously Nvidia has optimized theirs for for for Vera Rubin and you know that'll continue to be debated but there was a bunch of other stuff too that that just kind of high level since we weren't there but you know we had AWS made some big commits to a ton more compute from Nvidia again even though they have their own. we had the big announcement last week with Qualcomm AWS. These are kind of around the summit news, but I mean you had a ton of focus there on CPO.

42:55 There was a ton of on on network and memory optimization technologies. I don't know about you, I Brennan Burke from my team was there. I know we had an interesting 65 session with Amberella that should come out this week, but like it seemed like there was a lot more focus just, you know, on continuing to optimize the stack there. I I would wait for our team to put out their nerdy notes. because I got to be candid with all the stuff I was covering. I didn't get into the to the weeds at this one.

43:25 >> Yeah. Yeah. Me either. It was interesting and ironic, I guess, maybe the same week this rateayer protection act on data center energy costs came out and essentially they they passed something that that said that consumer prices for energy will not go up based on any data center that's built. And I think that's a I think that's a good thing and I think that is a a fair thing. it does need to be metered against all the other benefits that that that that are are put out there in the in the community, right?

44:01 so, anyways, I thought that was a got an adder here. So, great decode here, Daniel. but it's now time to get a little bit spicy and jump into the flip here. And, this topic is essentially that OpenAI's $1.2 2 trillion preIPO private valuation remains justified after all of this AI AI doomer news and also their their IPO was pushed out to to 2027. So let's dive in.

44:38 >> All right, Daniel, it looked like your your final head on there. So you're going to argue that a OpenAI is worth the $1.2 trillion dollar. Yeah, listen, I mean, last week was a safety headline, not a demand headline, and the market already told you which one matters, and you're seeing that already as as the stocks continue to rise. Saturday, Daario says, "Pace the frontier." Sam and Elon agree. Sam pulls his 26 IPO. Monday, chip stocks drop. Tuesday, smartest money in the world, knocking at OpenAI's door, wanting to come in at 1.2 trillion, a 1.5 trillion numbers being thrown out there. 1.2 is a 41% step up in only six months. and investors are starting the conversation. Sam's not asking. The money's trying to come in because they see the potential here. And look, the numbers support it. I mean, the run rate crossed 40 billion. It went up 20% in a single model release. It we, you know, we just talked about reaceleration that nobody had priced in in March when it was already valuing at close to a trillion dollars. you know, the burn against a $40 billion base, you know, is growing, but it's not growing the way people were once concerned. And we've already said Sam has gobbled up the compute that he needs to continue to make these investments, continue training. And let's be candid, no one's really slowing down. So, you know, if they were to slow down though, I mean, you know, pacing doesn't hurt anything in terms of already deployed revenue.

46:03 Enterprises are, you know, paying for what works today. And as Daario said, 5 to 10% of what's available is, you know, basically being used, meaning there's still so much more that can be done even with the models that already exist. So even if it slows down that only helps them even further. and if the compet you know the capability at the top were to slow the race becomes as we said distribution contracts brand cash. Open AI owns all four. Third party evaluators inside every lab is a compliance regime that only the Giants can afford. Sam is playing offense. That's why he's focused on safety. you know, he's he's basically falling off the field behind him like every great company has done when they've been monopolizing an industry, which is why it's going to happen again. Sam's got what he needs.

46:50 And frankly, if Anthropic is marketing at $2 trillion and still planning its IPO, 1.2 two feels very conservative given the fact that the open router data shows that the newest OpenAI models are better, they're being used faster, the revenue is growing more quickly, and the demand is is being created. So, not a bubble in OpenAI. and maybe the doomer changed the story a little bit, but it didn't change the demand, and it certainly hasn't hurt the valuation of Open AI.

47:17 >> Yeah, Dale, it's a great story. Unfortunately, it's wrong. I mean, OpenAI is absolutely not worth it. And I'm going to tell you I'm gonna tell you why here. So, it's burning it's burning cash at a historic rate and and it obviously needs this money even though they did massive payments and commitments on on all this infrastructure and they're giving away tokens left and right. At some point, this company actually has to make money like like Anthropic. It's second in revenue, too. It's and it's asking for a first place place treatment.

47:50 You know, Anthropic's run rate is 60% larger and its investors see a hundred billion to 120 billion by by by year by year end. let's not even talk about the discount rate. The amount of you know the Fed hiked 3.75 to 4% which increases the cost of capital pretty much everywhere. 10-year touched 5%. So long duration private marks are the most rate sensitive asset in the AI trade. and you know it's it's so funny part of the capital that that is is that OpenAI is expected to get is condition on the event that just slipped.

48:34 March's round 35 billion of Amazon's $50 billion depends on an IPO or or AGI and IPO is now 2027 and I don't think we can consider Astra AGI at this point and the the other thing is you know even Sam like he's endorsing slowing down by while raising at at a higher price if the pacing is real then then the growth slows if not there's a credibility cost and I already asked what happened you know which by the way I I I I totally agree final and I think the the most important element here is is open source pinnacle's 90% cost reduction with open models that we discussed on September 11th Salesforce just built COA on open weights instead of renting Frontier intelligence so I I rest my case here Daniel >> yeah they also built clawed force run on a frontier model. They also realize that the open weight models depend on the frontiers to be any good. But sure, you can win.

49:42 >> Not true. Not true. Not true. >> that that Nvidia's on the record saying that their models are not distilled. >> Fair. Now, let's be very clear >> because I'm I you know, I like Nvidia. Who do you know that's running Neotron to do all their AI work right now? all all their AI work >> like who's actually centralizing or building their loops and their skills and their tools around all their enterprise software right now using Neotron give me one >> I mean Alex and Ben off >> that but like they have cloud force like literally all their customers are doing cloud force like the entire I was at their entire thing was demonstrated on claude I get it like I do get by the way I think personally I do think if you have a Neotron and you have Palunteer level ontology, you can probably freaking do some amazing stuff on a completely open- source model. I'm just saying, by the way, where is Neotron on our benchmark?

50:41 >> Good question, >> because I would love to see how it does because I think that would be a real interesting proof point. We should do that. We should run Neotron against our five personas and see how it does against because here's what I I mean as an enterprise like not as a as a stock picker or a person that talks about the market path like I would love love love that if my if my cost of compute in my consumption and API cost went down by 90%. Now I'm not spending what some are but you know we we have we have probably in a you know multi6 figure annual run rate in token costs now I would like to spend less you see that we put out a survey today we got 50 enterprise >> I saw that >> to to tell us what they think about this this pacing the frontier. So >> yeah tell us about your your doomer audience. Well, no, it's just interesting because like we've spent a ton of time focusing on what the politicians say, what do the pundits say, what do the labs say, and then what do the largest providers of infrastructure say, but the bottom line is kind of goes back to enterprise deployment is freaking hard. And I think I think Dario talking about that 5 to 10% of actual the power models is being used is probably right. And most of the enterprises, they're trying to build a harness to be able to keep up with all the model diver diversity, but they having a hard time deploying you know, compliant governed AI that that meets all their requirements to to act semi or fully autonomously. And so they're kind of saying like look, we don't need more models. We need help to actually deploy this crap. Which is why we have forward deployed analysts and this is why Palunteer has forward deployed engineers is because building what's possible to your point earlier about PC's very possible building something and deploying it safely and securely with real customer data hard and so the enterprises are screaming we're okay if you slow down but by the way none of them believe that the the labs are doing it altruistically so >> for sure great great flip here let's now tune into bulls and bears.

52:47 So week off started pretty shaky and then it just started to absolutely rip. a lot of that was the AI doomer doomer selloff at the beginning of the week and then starting on I believe Wednesday everything just started to absolutely boom. Well, I tweeted on Coxin's news and then on Daario's news that every one of these FUD slashdoomer slash end of moments has presented a buying opportunity and this one will be no different. I stand by like look there's a lot of macro things going on like we do need to figure out how to exit this war. This oil thing is getting scary. like we got to figure out how to either finish it or exit it, but like we this he does not want his legacy to be that I don't think because he's criticized that a lot over time. the interest rate sensitivity, but obviously the the big tech company there is no price sensitivity. So there's no sensitivity to interest rates because if these guys have higher input costs, we've seen it with memory, they can just charge more. So, but what we've seen, Pat, is every single one of these doomer claims has led to a Jebans paradox, which we like to use that, but like where actually where we think there'll be less, there needs to be more. And and the biggest and the most analogous thing I can say here is guess what happens if we want to run safer AI. We got to spend more money on compute to do more training to actually build the the the safety into the the models. There's more training work, which guess what means exponentially more compute. So, it's like even the thing we think would slow us down, actually the labs to pace the frontier are going to need to invest more in safety. And much of that investment is more in training, which means they're going to need more compute. So, we get it wrong every time.

54:30 I just need bigger kahonas to make bigger bets because I I I've I've tweeted correctly, but I haven't always placed my financial bets correctly because there's always this underwhelming overwhelming fear because the narratives get so strong that maybe this time we'll be wrong. We just got to got to believe. But FUD equals opportunities. >> Yeah, it was. And and I I think right now we're going to see blocks move together after a certain period of of time. And if you look at the net increase over kind of this week versus last week in terms of capitalization, it's it's it's way up. And one one marker that, you know, hasn't been on a percentage basis moving a lot this year has been Nvidia.

55:16 And you know, even though they d they doubled down on literally doubling revenue for next year, it's just kind of been sitting there, but the market is is finally reacting to that. I I I'm I'm really amazed at how the market, you know, didn't didn't respond to oil. It really didn't respond to interest rates and it it it rebounded so quickly on the dumerism, but it was but it was good to see. All right. at Salesforce, and I don't know if you attended this, but they had their financial analyst day, they reaffirmed over $63 billion of revenue for for 2020 2030. But the stock the stock went down. anyways, which I have I think we have to imply that this is what a kind of a show me story show me story looks like. So yeah, I mean it cleared the streets model by by $3.8 billion, which was, you know, I think even JPM said quote unquote incredibly positive for the rerating thesis, you know, and, you know, he steifled came out and and counted six distinct modernization paths, including premium skew, upgrades. The the AI metrics in the outline though, they were over over a year a year old.

56:41 current ARR was above 1.5 billion up more than 240% yearover-year. So I think the bare case here is the company's target history not not not not AI in itself. So, this one was a little bit of a headscratcher, but all I can think of is that the street wants to, you know, actually see even even more evidence. I mean, the sellside guys were were primarily positive, right? Steifel, can accord, Freedom Capital, you know, equal weighted average of those guys that moved went from $258 to$298. So maybe Daniel, you can shed some some light on why the stock >> I mean there was a there was a weird irony. They had a massive outage the day of which is never great on your on your investor day when your whole system went down. They did have it fixed by midday but that was that was that was noteworthy. I think there was some concerns. I mean listen it was a packed house like I was one of one of only a couple of analysts that are nonfinancial that was even allowed in the room because the room was packed to the gill.

57:52 so people are definitely there and I I did like they were actually showing demos, meaning they were doing things with Cloud Force, building agents, building artifacts, showing how a business might perform certain tasks through pipeline or an agent to do a certain you know, customer service workflow. So that was great. having said that, I think there is some concern about the dependence on Enthropic. your mention of COA and building on Nvidia. I think that's going to be a big test is how much that that grows. And then again like you know I think we're in the middle of the ROI era, the hard ROI era as I like to call it. And I think they need to be able to show you know they have a they've built kind of a cost like we built for our benchmark they've built like a cost per task type pricing. and I think getting that cost per task optimized so that the most tax tasks at volume are being run across the Salesforce ecosystem on the right models is going to be key. They've got personas for all parts of the sales stack that they're building and they're continuing to expand them. And I think in the end like the math and the governance are going to be the things is you know Salesforce can deliver the governance by being inside that system of record and running it all through through them. But then again, you know, people are going to want to optimize for cost. And so I thought it was a, you know, a good number. I think you got, you know, they're talking about data AI remaining 100 plus percent growth for the next two fiscal years. you know, again, the building across the model landscape very very strong. you know, it was a good it was a good showing, but again, having your entire system go down on the day of your investor day probably you know, I don't know if that's why it went down, but it's just not it's just it just probably wasn't the look they were going for.

59:37 >> Yeah. Hey, let's move to the next the last topic. I'm going to skip interest rates and and I want would like you to talk about Nebius futurum equities. had some discussion on this. so Daniel, what what what's going on here? I mean, literally no free cash flow until after 20 2030 here. >> Yeah, I mean look, first of all, I can't believe you skipped interest rates. I love interest rates. don't you all love interest rates? Okay.

60:08 look, I think the real news around Nebius this week is that you know they showed some big pricing moves. So yeah, you know, we had some interesting conversations about the fact that you know in 28 you know we're expecting them to deliver about 15 billion of IBIDA and they're already sitting at a $60 billion market cap. So they're, you know, but that's if you actually look at that as a multiple of of two years out, they're actually priced.

60:37 Okay. I think the the real question is is about what Nebius can charge. And I think this week they came out, I believe they raised their prices across the board by more than 20%. That's across their H100, H200 and Blackwell and soon Vera Vera products. And when you start seeing the fact that they have this kind of price sensitivity and the ability to raise prices at this rate, you start to realize that the constraint is very real, the demand still remains elevated, the the markets pricing these things probably undervaluing them because the ability to generate growth and ibida remains high. Now core took a bit of a hit this week. Nebius is in the same ballpark. And I think the reason that's happening has largely to do with the fact that while they are creating IBIDA, it's it's adjusted earnings. It's not cash. These businesses are going to have to keep investing in incredibly intense rates for a long time. But, it looks like that that with Nebius's pricing power and this demand curve, Pat, that I think they're going to remain a a strong play. And, you know, the future equity side, you know, likes them a lot. I continue to like their token factory approach and the the profitability that they have and and you know, so NBS looks good.

61:59 >> Yeah, I like their vertical integration meaning they're not buying they're creating their own infrastructure which is is unique across the Neoclouds. So, hey Daniel, great show. I want to thank everybody for tuning in. Hope hope you have a great week. You had a great weekend. we really appreciate you. Hit that subscribe button. Tell your friends, your family, your pets, pretty much everybody who parks themselves in front of some form of video and is looking for insights on tech.

62:31 >> Take us for a walk. Get out there, be healthy, touch grass, right? >> Yeah, you can touch grass, too. And listen to the audio portion of it as well. >> I'm not that good-looking. At least not me. >> So, anyways, thanks everybody. Take care.